Why ranking employees based on their performance backfires


When Bill Michael, the former chairman of KPMG, told staff at “stop complaining” At a virtual meeting in February, one of the issues they complained about was the “forced distribution” model used to assess their performance. This way of evaluating people is a zombie idea. No matter how often it turns out to be disastrous for a company’s culture or morale, it refuses to die.

Generally speaking, “forced distribution” or “stacking” methods divide employees into a certain percentage of top, middle, and underachievers each year. In the British senior civil service, for example, the proportions were fixed at 25, 65 and 10% respectively, until the system is reformed in 2019.

The idea is to avoid “grade inflation” and force managers to have honest conversations with people who are not up to par. Jack Welch, former CEO of General Electric, said in 2013 he couldn’t understand why people thought it was cruel. “We classify kids in school, often as young as 9 or 10, and nobody calls that cruel. But somehow adults can’t handle it? Explain it. ”

There are circumstances where it works. A former accounting intern said he only agreed to tolerate long hours and rectification work if he was likely to be promoted. “In this context, you really need to know if you are in the 25th or the 75th percentile,” he told me.

But there are many other examples where the method fails, even on its own terms. The big problem is that it mixes someone’s absolute performance with their relative performance against their peers. You may be hitting all of your goals, for example, while still remaining ranked low and labeled “underachieving” on a strong team. Sarah Nickson, a researcher at the Institute of Government think tank, said the UK government’s’ deep dive ‘into the forced distribution system of civil servants revealed that’ many people in the poorest 10% do not ‘were not underperforming’.

This not only seems unfair to the employee, but also deeply uncomfortable for the supervisor. “What was difficult was when you had people who met expectations, with a 3 rating, but since there were so many 1s, 2s and 3s, there was pressure to give them a 4 and them. put on an improvement plan, ”a former manager at a large accounting firm told me.

In many organizations, supervisors assign interim grades and then reduce the overall allocation in “moderation” meetings with other managers. But it’s hard to objectively classify people in white collar jobs doing different things. “You would have people sitting in a room who barely knew each other, comparing apples to pears,” said a second manager at another company.

A number of line managers told me that they had played with the system. They would put the people who had just joined the team in the lower range, as they were easier to sacrifice. Or, perversely, they tried to hang on to bad performers so that they could put them at the bottom of the ladder and protect everyone.

The system can also discourage teamwork. Microsoft’s Forced Distribution Filing System (since discontinued) was blamed for creating a toxic culture in the early 2000s that stifled innovation. Good performers would have avoided working together for fear of suffering in the ranking. People quietly sabotaged their colleagues.

Finally, these systems are often corrosive to morale, hampering the very performance they aim to improve. Research shows that feedback has a moderately positive effect on performance on average, but in a third of cases it decreases performance. The bottom line is whether people think the feedback is fair.

Employees who express positive emotions after feedback tend to perform better in the future, while those who express negative feelings perform worse. In a forced distribution, only those who rank higher than average are likely to feel particularly happy. As Nickson points out, it is by definition only a minority. “It’s good for your ego when you are told that you are a high achiever, [but] I think the question is, does this advantage outweigh the disadvantages for everyone? “

Microsoft ditched forced distribution in 2013. Britain’s senior civil service followed suit in 2019. KPMG told me it plans to “move away” from the system to “allow more flexibility” as well.

Human resources departments have had to rethink a lot of old notions since the start of the pandemic. The counterproductive pseudoscience of forced distribution should be an idea that ultimately remains dead.

sarah.oconnor@ft.com

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